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Shaping the future.#Thinking ahead.

Annual Report 2016

SECONDS

Aareal Bank Group is a leading provider of smart fi nancing, soft-ware products and digital solutions for the property sector and related

industries. Whether it is offi ce buildings, hotels, shopping centres or logistics and residential properties, whether in North America, Asia or Europe, our customised and fl exible solu-tions support our customers in fi nancing their international property investments. We offer our clients in the European prop-erty and energy industries a unique combi-nation of specialised banking services and

innovative digital products and services – designed to optimise their business pro cesses, enhancing effi ciency. Our digital platforms also integrate property management with adjacent sectors. The basic factors driving our success are our global expertise and many years of close cooperation with the target sectors, with local experts and with clients. Because we look beyond the scope of traditional banking and IT services, we are able to reliably assess material developments, opportunities and risks at an early stage, implementing the insights gained particularly quickly.

Aareal Bank Group in 60 seconds

SECONDS

Aareal Bank Group is a leading provider of smart fi nancing, soft-ware products and digital solutions for the property sector and related

industries. Whether it is offi ce buildings, hotels, shopping centres or logistics and residential properties, whether in North America, Asia or Europe, our customised and fl exible solu-tions support our customers in fi nancing their international property investments. We offer our clients in the European prop-erty and energy industries a unique combi-nation of specialised banking services and

innovative digital products and services – designed to optimise their business pro cesses, enhancing effi ciency. Our digital platforms also integrate property management with adjacent sectors. The basic factors driving our success are our global expertise and many years of close cooperation with the target sectors, with local experts and with clients. Because we look beyond the scope of traditional banking and IT services, we are able to reliably assess material developments, opportunities and risks at an early stage, implementing the insights gained particularly quickly.

Aareal Bank Group in 60 seconds

Aareal 2020 – Adjust. Advance. Achieve.

Protecting the base whilst unlocking new potential

”With our Aareal 2020 programme,

we are taking on the challenges

of the future. In an environment

characterised by technological

evolution, changing customer

needs and tougher competition,

we are protecting our strong foun-

dation and, at the same time,

unlocking new revenue potential.

Leveraging our successful busi-

ness model, we are expanding

the market position of both Group

segments.“

Hermann J. MerkensChairman of the Management Board

Aareal 2020 – Adjust. Advance. Achieve.

Contents

Thinking ahead. Shaping the future.

1 Aareal 2020 – Adjust. Advance. Achieve.

5 A digital tomorrow

8 Creating value – our segments

26 Digital enablers

34 Essay ”A culture for the digital age“

To our Shareholders

38 Letter from the Management Board

42 The Aareal Bank Share

Group Management Report

48 Fundamental Information about the Group

51 Report on the Economic Position

69 Our Employees

74 Risk Report

95 Accounting-related Internal Control and

Risk Management System

98 Report on Expected Developments

104 Corporate Governance Statement

105 Principles of Remuneration of Members of the

Management Board and the Supervisory Board

107 Explanatory Report of the Management Board

Consolidated Financial Statements

116 Statement of Comprehensive Income

118 Statement of Financial Position

119 Statement of Changes in Equity

120 Statement of Cash Flows

121 Notes

240 Independent Auditors’ Report

Transparency

250 Corporate Governance Statement

261 Report of the Supervisory Board

268 Offices

270 Glossary

274 Financial Calendar

1) The previous year’s figures include the negative goodwill of € 150 million from the acquisition of Westdeutsche ImmobilienBank AG (WestImmo).2) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.3) Structured Property Financing segment only4) Proposal to be submitted to the Annual General Meeting5) Excluding € 1.1 billion in private client business (31 December 2015: € 1.5 billion) and € 0.6 billion in local authority lending business by WestImmo

(31 December 2015: € 0.6 billion)6) The calculation of regulatory capital takes into account the Management Board’s proposal for the appropriation of profits for the financial year 2016.

The appropriation of profits is subject to approval by the Annual General Meeting.7) Published on 12 January 20178) Please refer to our Sustainability Report for more details.

This report contains rounded numbers, which may result in slight differences when aggregating figures and calculating percentages.

Aareal Bank Group

Key Indicators

1 Jan - 31 Dec 2016 1 Jan - 31 Dec 2015

Results1)

Operating profit (€ mn) 366 470

Consolidated net income (€ mn) 234 374

Consolidated net income allocated to ordinary shareholders (€ mn)2) 199 339

Cost/income ratio (%)3) 41.2 43.2

Dividend per share (€)4) 2.00 1.65

Earnings per ordinary share (€)2) 3.33 5.66

RoE before taxes (%)2) 13.2 18.6

RoE after taxes (%)2) 8.1 14.7

31 Dec 2016 31 Dec 2015

Statement of financial position

Property finance (€ mn)5) 27,928 30,894

of which: international (€ mn) 23,423 25,243

Equity (€ mn) 3,129 3,044

Total assets (€ mn) 47,708 51,948

Regulatory indicators 6)

Risk-weighted assets (€ mn) 14,540 16,709

Common Equity Tier 1 ratio (CET 1 ratio) (%) 16.2 13.8

Tier 1 ratio (T1 ratio) (%) 19.9 17.2

Total capital ratio (%) 27.5 23.8

Common Equity Tier 1 ratio (CET1 ratio) (%) – fully phased – 15.7

13.1

Employees 2.728 2.861

31 Dec 2016 31 Dec 2015

Fitch Ratings

Issuer rating long-term

BBB+ (outlook: stable)

BBB+ (outlook: stable)

short-term F2 F2

Pfandbrief rating AAA AAA

Moody’s7)

Issuer rating long-term

Baa1 (outlook: stable) n/a

short-term P-2 n/a

Pfandbrief rating AAA n/a

Sustainability 8)

MSCI AA AA

oekom prime (C) prime (C)

Sustainalytics 71 68

In order to achieve our goals, we launched our strategic ”Aareal 2020“ programme in the spring of 2016. It consists of three parts:

Implementing the strategy within the segments, and as a Group – leveraging our strengths

Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing

CRE: Commercial Real Estate; SRM: Supplier Relationship Management; BRM: Building Relationship Management; CRM: Customer Relationship Management

Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon

Smart World including

SRM, BRM, CRM)

Further development/expansion

– Three-continent strategy

– On-balance sheet

– ERP systems

– Consulting

– Digital products

– Payments/

Funding

Structured Property Financing

Digitalisation

Consulting/ServicesCRE

Adjust.Establishing structures and

processes, which allow us not only to keep up with growing

and rapidly changing requirements, but to also shape these changes.

Advance.Further developing the existing

service portfolios with a consistent focus on clients – by gaining

new customer groups and tapping new markets, and thus new revenue

potential as well.

Achieve.Creating sustainable values

for clients, shareholders and investors, as well as for

employees.

2 Thinking ahead. Shaping the future. | Aareal 2020 – Adjust. Advance. Achieve.

In order to achieve our goals, we launched our strategic ”Aareal 2020“ programme in the spring of 2016. It consists of three parts:


Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation


Adjust.Establishing structures and

processes, which allow us not only to keep up with growing

and rapidly changing requirements, but to also shape these changes.

Advance.Further developing the existing

service portfolios with a consistent focus on clients – by gaining

new customer groups and tapping new markets, and thus new revenue

potential as well.

Achieve.Creating sustainable values

for clients, shareholders and investors, as well as for

employees.


We developed an extensive strategic roadmap for the implementation of Aareal

2020, including various initiatives and projects for the further development of our Group. One of our top priorities is unlocking new revenue potential in both segments; another is to adapt structures and processes to our stakeholders’ requirements in a digital world.

Foundation laid. Milestones achieved.

In 2016, we were able to complete all the preparations necessary for the implementation of our programme for the future. Not only did we define the strategic thrusts for the further develop-ment of our business model, initiate corresponding projects and implement first specific initiatives; we also drove numerous structural changes forward, e.g. by readjusting our IT archi-tecture, making our organisational structure more flexible, and further developing our corporate culture.

We have already reaped the first fruits of success by unlocking new revenue potential: for example, we have expanded the US business, expedited our syndication activities in new busi-ness and successfully launched innovative digital solutions that provide significant additional value for our clients.

In 2017, we will intensify our activities for the further develop-ment of the business model. Taking into account the stable foundation of our core business, it is our aim to gain new customer groups and enter new ecosystems, starting from the housing industry, consistently exploiting opportunities arising from the digitalisation of the finance and property industries.For this purpose, we will expand into attractive markets, make our balance sheet more flexible and reduce non-core assets, At the same time, we continue optimising our processes,in order to make Aareal Bank even more attractive – to clientsand shareholders alike.

3

Our programmefor the future

New business areas through digitalisation

Ongoing internationalisation

Growing demand for syndication services

Property marketskeep growing

Attractive yields in related industries

Strong need forinnovative solutions

Advance.

Achieve.

Explore new client groups and new markets

Continue to develop existing business

Continue to strengthenagility, power to innovate, and readiness to embrace change

Realise the strategic blueprint

for the Groupand the segments

Consistentlyimplement measures

Meet demanding

fi nancial targets

Adjust.Optimise funding

Enhanceeffi ciency

Anticipateregulation


Our programmefor the future

New business areas through digitalisation

Ongoing internationalisation

Growing demand for syndication services

Property marketskeep growing

Attractive yields in related industries

Strong need forinnovative solutions

Advance.

Achieve.

Explore new client groups and new markets

Continue to develop existing business

Continue to strengthenagility, power to innovate, and readiness to embrace change

Realise the strategic blueprint

for the Groupand the segments

Consistentlyimplement measures

Meet demanding

fi nancial targets

Adjust.Optimise funding

Enhanceeffi ciency

Anticipateregulation


A digital tomorrow

D igitalisation has already changed our world lastingly – and will continue doing so. It is all-encompassing, omnipresent, and has a signifi cant infl uence upon the economy and society.

It creates new client needs as well as new business models, breaking up value creation chains and revolutionising the way we communicate. In fact, it was several years ago that Aareal Bank Group began bracing itself for the disruptive force of the upcoming digitalisation. Thanks to our unique combination of banking and IT services, we are pioneers of the digital age within our sector – in many areas. For us, the constant technological change presents an opportunity to create additional value for our clients, while at the same time achieving new revenue potential. It is our aim to accompany and advise our clients in their use of new digital opportunities, to provide pioneering solutions, tailor-made to their needs, and to shape the future – together with our clients. We are optimally positioned to capitalise on technological change in the best way possible on the one hand, and to implement the strategic thrusts of Aareal 2020 on the other: by combining our decades of experience in fi nancing solutions and services (especially in the housing industry) with our outstanding technological expertise, which we have gained – not least thanks to our own market-leading IT subsidiary Aareon. With numerous innovative digital products, our range of services is already setting standards. In order to anticipate new developments and trends at an early stage, we are intensifying our collaboration with start-ups and continuously investing in technological know-how. We also attach great importance to innovative freedom within the Group. Our customer relationships are characterised by a high level of mutual trust and long-standing cooperation.

Thinking ahead. Shaping the future.

5Thinking ahead. Shaping the future. | A digital tomorrow

A digital tomorrow

The four dimensions of digitalisation

Optimiseorganisationalperformance

– Digital client communications

– Digital client service and maintenance

– Optimise database systems

– Enhance fl exibilityof sales organisation

Develop new financing and payment solutions

– Building a centralised online platform

– Launch a variety of apps,such as Aareal Sign

– Payments and data processingsolutions

Continue developingthe existingproduct portfolio

– Further development of the ERP portfolio

– Transfer successful local solutionsinto other markets

– Further development of the BK 01 product family

Develop newdigital solutions

– Range of new CRM, BRM,and SRM solutions

– Implement the platform strategy

- Cooperations with start-ups

Aareal Bank Group

Our digital roadmap within the Group

Within Aareal 2020, it is our aim to develop the best possible solutions for our

clients Group-wide by exploiting the advantages of digitalisation. At the same time, we want to expand our pioneering role as a provider of innovative digital solutions for our clients. We have developed a digital roadmap with four strategic thrusts, enabling us to structure the many innovative ideas we have:

6 Thinking ahead. Shaping the future. | A digital tomorrow

The four dimensions of digitalisation

Optimiseorganisationalperformance

– Digital client communications

– Digital client service and maintenance

– Optimise database systems

– Enhance fl exibilityof sales organisation

Develop new financing and payment solutions

– Building a centralised online platform

– Launch a variety of apps,such as Aareal Sign

– Payments and data processingsolutions

Continue developingthe existingproduct portfolio

– Further development of the ERP portfolio

– Transfer successful local solutionsinto other markets

– Further development of the BK 01 product family

Develop newdigital solutions

– Range of new CRM, BRM,and SRM solutions

– Implement the platform strategy

- Cooperations with start-ups

Aareal Bank Group

Our digital roadmap within the Group

Within Aareal 2020, it is our aim to develop the best possible solutions for our

clients Group-wide by exploiting the advantages of digitalisation. At the same time, we want to expand our pioneering role as a provider of innovative digital solutions for our clients. We have developed a digital roadmap with four strategic thrusts, enabling us to structure the many innovative ideas we have:

6 Thinking ahead. Shaping the future. | A digital tomorrow

Development of new digital solutionsWe want to provide innovative solutions in the areas of customer relationship management (CRM), business relation-ship management (BRM) and supply relationship manage-ment (SRM) – based on a digital platform strategy. Close cooperation with start-up companies ensures our solutions are as innovative as possible, and at the same time benefit our clients as much as possible.

Development of new fi nancing and payment transaction solutionsWe are extending our range of services with tailor-made apps, together with payment transaction and data processing solutions. Simultaneously, we are creating a new platform for our digital products with an online portal.

Further development of our existing product portfolioWe are engaged upon further systematic development of our existing products, creating solutions which set technological standards. Our ERP portfolio and our BK 01 product family are especially important. We will also transfer solutions, which have only been used nationally until now, into other countries.

Optimisation of organisational performanceWe are using the opportunity that digitalisation offers us to further develop and improve our customer communication channels. Hence we are expanding our digitally supported customer service offers, optimising our customer care and database systems, and organising our sales network in a more flexible way. We are also aiming at generating new potential synergies for product development.

We support our customers with new products and services, optimising their business processes and enhancing the latter’s efficiency. By digitalising their processes, companies can increase customer satisfaction and thus also the level of customer loyalty. Another opportunity that digitalisation provides is to be able to create the foundation of a modern infrastructure with a comfortable interface, and to enable a system-integrated electronic data interchange with opti-mised processing operations for our clients and their business models.

Our digital roadmap also encompasses the expansion of activities into new countries, as well as extending the range of activities in countries where we are already active. Our scheduled new products serve as promising market entry and differentiation opportunities. Therefore, our digital roadmap acts as a central pillar of our growth strategy, in which the three specific thrusts – Adjust. Advance. Achieve. – are firmly rooted.

”Our aim: Aareal Bank

Group will be the

leading provider of smart

fi nancing, software

products and digital

solutions for the property

sector and related

industries.“

Hermann J. MerkensChairman of the Management Board

7

Creating value – our segments

"We are the provider of smart financing solutions for commer-cial property – especially office buildings, hotels, shopping centres as well as logistics properties and residential property – in Europe, North America and Asia. We focus on financing existing buildings. Our particular strengths are structuring expertise, our reliability, cross-border financing and supporting local markets.

Our 90 years of experience as specialist in the property sector and the high demands we place on quality have reaped us trusting partnerships with our customers, and these are the foundations of our activity. Therefore, we focus on cultivating and expanding our client relationships.

Continuing our growth story, we will be expanding our pres-ence on markets and in asset classes that have an attractive risk/yield profile. That includes for example expanding the North America portfolio. We are going to run our portfolio management more actively and lend more flexibility to our balance sheet by expanding our outplacement opportunities. Especially in this regard, our partners place trust in our struc-turing expertise and our international network.

To open up new markets and client groups, we take advantage of the potential presented by digitalisation in our interactions with clients and identify new digital business opportunities. We are also reviewing the supply of extra services along the value chain in commercial property financing. Servicing in particular still has great potential for us."

The backbone: Structured Property Financing

”We are the provider of smart fi nancing solutions for commercial property – especially offi ce buildings, hotels, shopping centres as well as logistics prop-erties and residential property – in Europe, North America and Asia.“

Christof WinkelmannMember of the Management Board of Aareal Bank

8 Thinking ahead. Shaping the future. | Creating value – our segments



"We are the provider of smart financing solutions for commer-cial property – especially office buildings, hotels, shopping centres as well as logistics properties and residential property – in Europe, North America and Asia. We focus on financing existing buildings. Our particular strengths are structuring expertise, our reliability, cross-border financing and supporting local markets.

Our 90 years of experience as specialist in the property sector and the high demands we place on quality have reaped us trusting partnerships with our customers, and these are the foundations of our activity. Therefore, we focus on cultivating and expanding our client relationships.

Continuing our growth story, we will be expanding our pres-ence on markets and in asset classes that have an attractive risk/yield profile. That includes for example expanding the North America portfolio. We are going to run our portfolio management more actively and lend more flexibility to our balance sheet by expanding our outplacement opportunities. Especially in this regard, our partners place trust in our struc-turing expertise and our international network.

To open up new markets and client groups, we take advantage of the potential presented by digitalisation in our interactions with clients and identify new digital business opportunities. We are also reviewing the supply of extra services along the value chain in commercial property financing. Servicing in particular still has great potential for us."

The backbone: Structured Property Financing

”We are the provider of smart fi nancing solutions for commercial property – especially offi ce buildings, hotels, shopping centres as well as logistics prop-erties and residential property – in Europe, North America and Asia.“

Christof WinkelmannMember of the Management Board of Aareal Bank


Structured Property FinancingOur USPs as key success factors

Unique selling propositions

Local markets

Structuringexpertise

Cross-border fi nancing

”Sector expertise“

”Partner on an equal footing“

”Reliable partner“

”Syndication partner“

– Effi cient utilisation of the

balance sheet, and active

portfolio management

– Enhanced fl exibility

– Increased net

commission income

– Selective origination

as a USP

– Digitalise processes

– Organic and inorganic growth

We aresector experts and

partners on an equal footing

Strategic blueprint


Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation


Focus: Structured Property Financing segment

9


Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



Structured Property FinancingOur USPs as key success factors


Local markets

Structuringexpertise

Cross-border fi nancing



”Reliable partner“

”Syndication partner“

– Effi cient utilisation of the

balance sheet, and active

portfolio management

– Enhanced fl exibility

– Increased net

commission income

– Selective origination

as a USP

– Digitalise processes

– Organic and inorganic growth

We aresector experts and

partners on an equal footing

Strategic blueprint


Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



9

’Quality made by Aareal‘ makes the difference

We have been able to meet all the stringent requirements" says Schöttmer. "But it has been our structuring expertise and our "local footprint" that tipped the scales for us. That is because we have specialist teams with cross-border expertise, our strong regional presence in Europe through the com-bined use of market and sector experts and an excellent track record through various benchmark transactions in the last few years. Our big network, many years of know-how and efficient processes permitted us to make a success of this trans-action, together with the client."

Andy Rofe, Invesco Real Estate’s Managing Director – Europe commented: ”We are delighted to announce the partnership with Aareal Bank AG, with whom we have worked for many years now. For us, this is a ground-breaking project in our industry, which creates a loan facility that fits both the profile and nature of our European mandate. This tailor-made facility means stability and reliability for our diversified portfolio with its high-quality properties in some of the best locations in Europe over the next ten years. Furthermore, it gives us the necessary flexibility to further expand our European man-date or to sell properties, thus optimising our performance for the benefit of our investors."

A milestone in cross-border fi nancing transactions

Severin Schöttmer is delighted with the professional and trustful cooperation with Invesco Real Estate, a long-standing customer of the Bank. In December 2016 Aareal Bank was mandated by Invesco Real

Estate to arrange a credit facility of up to € 1 billion. Schöttmer, Managing Director Special Property Finance at Aareal Bank AG, says: "What we have assembled with this project, together with our client, is a milestone in financing large-volume cross-border transactions. The project points the way ahead for the sector. Demands were very complex because it is a credit facility that crosses frontiers in financing a portfolio of first-class properties in top locations of 27 cities, across seven countries. The financing will run for 10 years. What was called for was great flexibility in regard of currencies, fungi bility of the diversified property portfolio and solutions in respect of growth potentials"

Severin Schöttmer,Managing Director

Special Property Finance


’Quality made by Aareal‘ makes the difference

We have been able to meet all the stringent requirements" says Schöttmer. "But it has been our structuring expertise and our "local footprint" that tipped the scales for us. That is because we have specialist teams with cross-border expertise, our strong regional presence in Europe through the com-bined use of market and sector experts and an excellent track record through various benchmark transactions in the last few years. Our big network, many years of know-how and efficient processes permitted us to make a success of this trans-action, together with the client."

Andy Rofe, Invesco Real Estate’s Managing Director – Europe commented: ”We are delighted to announce the partnership with Aareal Bank AG, with whom we have worked for many years now. For us, this is a ground-breaking project in our industry, which creates a loan facility that fits both the profile and nature of our European mandate. This tailor-made facility means stability and reliability for our diversified portfolio with its high-quality properties in some of the best locations in Europe over the next ten years. Furthermore, it gives us the necessary flexibility to further expand our European man-date or to sell properties, thus optimising our performance for the benefit of our investors."

A milestone in cross-border fi nancing transactions

Severin Schöttmer is delighted with the professional and trustful cooperation with Invesco Real Estate, a long-standing customer of the Bank. In December 2016 Aareal Bank was mandated by Invesco Real

Estate to arrange a credit facility of up to € 1 billion. Schöttmer, Managing Director Special Property Finance at Aareal Bank AG, says: "What we have assembled with this project, together with our client, is a milestone in financing large-volume cross-border transactions. The project points the way ahead for the sector. Demands were very complex because it is a credit facility that crosses frontiers in financing a portfolio of first-class properties in top locations of 27 cities, across seven countries. The financing will run for 10 years. What was called for was great flexibility in regard of currencies, fungi bility of the diversified property portfolio and solutions in respect of growth potentials"

Severin Schöttmer,Managing Director

Special Property Finance


”The remarkable thing about this financing is the focused col-laboration, combined with the high degree of professionalism and expertise on both Aareal Bank's and the client's part . Needless to say that we use digital data rooms for the com-munication with our partners, in order to accelerate processes. The financing comprises seven countries and two currencies. To manage that successfully, it is not only Aareal Bank's Sales units who carry out their acquisition and analysing activities in a targeted manner, Credit Management is also extensively involved with various risk management, transaction man-agement and transaction advisory (i.e. supervision of contract documentation) teams The Treasury division supports this type of financing with a high level of expertise, and so do the valuers of our subsidiary, Aareal Valuation GmbH, and the circle is completed by the experts in our syndication team who successfully structured and implemented the syndication. This shows that the knowledge needed for a successful trans-action must be broadly diversified.“

”The remarkable thing about this fi nancing is the focused collaboration, combined with the high degree of pro-fessionalism and expertise on both Aareal Bank's and the client's part.“

Dagmar KnopekMember of the Management Board of Aareal Bank

Invesco Real Estate Portfolio

Project: portfolio of 27 prime properties

in seven European countries Credit volume: € 1 billion Role of Aareal Bank: Arranger and Underwriter

1111

from left: Jens Engemann,

Senior Manager Credit

Management

Michael Eisenkolb,

Director Special Property Finance

Johannes Kupers,

Vice President Special

Property Finance

Elvira Valiullina,

Manager Credit Management

Christof Teichmann,

Director Business &

Syndication Management


2.

1.

Interview with Christian Schmid, gb2016.aareal-bank.com/

syndication

”Competence and experience in syndicating are becoming all the more critical for success in our market" says Christian Schmid, Managing Director Business & Syndication Manage-ment at Aareal Bank. "The arrangement of a resilient and established syndication network has become increasingly important to be in the position to offer our clients maximum flexibility."

Schmid welcomes this trend: "That is only positive for us because we are good at meeting the increased demands on syndication competence. Our syndication team has many years of expertise as well as intensive and complex contacts to well-known syndication partners from various sectors. The transactions agreed in 2016 with Invesco Real Estate, Cégereal and Périsud show this. Over the last few years we have been able to strengthen our relationships through high-volume financing and by continuously involving our contacts in on-going transactions, particularly in the insurance area. We expect an enhancement of our syndication competence and

Our syndication competence provides customers with genuine added value

Christian Schmid,

Managing Director

Business & Syndication Management

Cégereal

Project: Portfolio of three office properties

in prime locations in Paris, France Credit volume: € 525 million Role of Aareal Bank: Co-Mandated LeadArranger and Co-Underwriter

Tour CBX

Project: Office property in Paris, France Credit volume: € 215 million Role of Aareal Bank: Arranger, Agent and Lender

related processes from the strategic partnership we have just concluded with London-based Mount Street, a corporation specialised in servicing and credit management of commercial and residential property portfolios in particular."

Schmid says: "Customers profit from our syndication com-petence in two ways. Firstly we are a one-stop contact that structures the transaction and then takes on the syndication. Secondly, we are the interface to the syndication partner so that the clients can look after their core business. We offer our clients genuine added value and increase their agility and flexibility."

1313

Market know-how Structuring expertise

Sector expertise

£

€

$

Structured Property Financing segment

Europe

Asia

North America

Aareal

ThirdParty

Aareal

Property types

AAREAL

Underwriting

AAREALLogistics properties

Aareal BankWiesbaden

Operates on 3 continents in more than 20 countries

Approx. € 6.7 bn in cross-border

financings since 2010

Collateral pool

Financing structure

Cash flow

UK F S

€ 58 bn in financings provided since 2010 for properties valued at € 90 bn in total

Retail properties

Hotel properties

Focus: local and international client relationships

Balance sheet capacity

€ 47.7 bn total assets

Clients

ClientsDirect local and international

relationships with clients, consultants and

intermediaries

Financial institutions

Insurance companies, investment banks,

pension funds

Industry experts

Hotels, shopping centres, logistics properties, etc.

FundsClosed-end, open-ended

Publicly-listed real estate companies

REITS etc.

Private equityVenture capital

Family offices Asset managers

Private investors

High-net-worth individuals


Market know-how Structuring expertise

Sector expertise

£

€

$

Structured Property Financing segment

Europe

Asia

North America

Aareal

ThirdParty

Aareal

Property types

AAREAL

Underwriting

AAREALLogistics properties

Aareal BankWiesbaden

Operates on 3 continents in more than 20 countries

Approx. € 6.7 bn in cross-border

fi nancings since 2010

Colleteral pool

Financing structure

Cash fl ow

UK F S

€ 58 bn in fi nancings provided since 2010 for properties valued at € 90 bn in total

Retail properties

Hotel properties

Focus: local and international client relationships

Balance sheet capacity

€ 47.7 bn total assets

Clients

ClientsDirect local and international

relationships with clients, consultants and

intermediaries

Financial institutions

Insurance companies, investment banks,

pension funds

Industry experts

Hotels, shopping centres, logistics properties, etc.

FundsClosed-end, open-ended

Publicly-listed real estate companies

REITS etc.

Private equityVenture capital

Family offi cesAsset managers

Private investors

High-net-worth individuals


1.

2.

3.

”The US is a very attractive market for us", says Christof Winkelmann, member of the Management Board of

Aareal Bank. "We have being doing successful business in the US for many years now and have a good market footing with

our range of services. As part of Aareal 2020 we want to expand our US business further. It is a great success that we were able to extend our presence in the US already in 2016.

Especially the transactions: ’Park Square Boston‘, ’462 Broad-way Retail and Office Building‘ and ’Beverly Hilton/Waldorf

Astoria Beverly Hills‘ are good examples for this. The confidence our customers place in us is further motivation.“

Our success in expanding the

US business is encouraging

462 Broadway Retail and Offi ce Building

Project: Retail and office premises

in New York, USA

Credit volume: USD 135 million

Role of Aareal Bank: Sole Administrative Agent

and Lender

Beverly Hilton/Waldorf Astoria Beverly Hills

Project: Hotels in Beverly Hills, USA


Role of Aareal Bank: Administrative Agent

and Lender

Park Square Boston

Project: Office property in Boston,

Massachusetts, USA


Role of Aareal Bank: Sole Administrative

Agent and Lender

15

”We offer our clients in the property and energy sectors a unique combination of specialised banking services, software products and digital solutions. “

Thomas OrtmannsMember of the Management Board of Aareal Bank

Our growth driver: the Consulting/Services segment


”We offer our clients in the property and energy sectors a unique combination of specialised banking services, software products and digital solutions. “

Thomas OrtmannsMember of the Management Board of Aareal Bank

Our growth driver: the Consulting/Services segment


Focus: Consulting/Services segment


Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation


“We offer our clients in the property and energy sectors a unique combination of specialised banking services, software products and digital solutions. Our subsidiary Aareon AG is the leading international consultancy and IT systems house for the property sector in Europe.

In the years to come, we will systematically expand our dynamic Consulting/Services business segment, by using our position as the leading ERP provider in Europe. Thus, we will be able to grow in the digital housing industry ecosystem. We will also extend our cross-border sales activity, launch additional products for the ERP systems we provide, and con-tinuously expand our range of new digital solutions.

We will not only offer our products and services to the housing industry, but increasingly also to related sectors, in particular to utilities. We especially recognise potential in the payments transaction service business, IT service and IT consulting. The next steps will be to continue developing our existing platform products that facilitate management tasks for housing companies. We will also expand our range of payments transaction services and IT products, to also include our customers’ customers (B2B2C) as well as smaller housing companies and managers.”

17

Focus: Consulting/Services segment


Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation



Expansion of

Utilities

Ecosystem

Further develop-

ment of payment

services and IT

Syn

dic

atio

nS

ervi

cing


Digitalisation

Structured Property

Financing

Platform

products

Expansion of

Housing industry

ecosystem (Aareon


SRM, BRM, CRM)




– ERP systems

– Consulting


– Payments/

Funding


Digitalisation


Aareal Bank Group’s Smart World – New digital solutions

Possessing our unique combination of IT and banking solutions, deep know-how of our customers’ processes and systems,

their payment transaction and ERP systems, and thanks to our digitalisation skills, we are in a position to partner our customers into their digital future.

Consulting/Services:Our USPs as key success factors


Expertise in digitalisation

Unique combination

of IT and banking solutions

Profound know-how of

processes and systems

– Sustainable and effi cient

segment

– Rapid growth in adjacent

ecosystems

– New sources of revenue and

additional growth

Strategic blueprint


”One-stop service“

”Reliable IT partner“


ERP payment management in the housing

ecosytem


Aareal Bank Group’s Smart World – New digital solutions

Possessing our unique combination of IT and banking solutions, deep know-how of our customers’ processes and systems,

their payment transaction and ERP systems, and thanks to our digitalisation skills, we are in a position to partner our customers into their digital future.

Consulting/Services:Our USPs as key success factors


Expertise in digitalisation

Unique combination

of IT and banking solutions

Profound know-how of

processes and systems

– Sustainable and effi cient

segment

– Rapid growth in adjacent

ecosystems

– New sources of revenue and

additional growth

Strategic blueprint


”One-stop service“

”Reliable IT partner“


ERP payment management in the housing

ecosytem


Our product pipeline is very well-stocked with digital solutions:

Aareon Smart World Cockpit

The Aareon Smart World Cockpit is being developed on the basis of the British Aareon solution ”360° Field Worker”, which is already on the market in the United Kingdom. With Aareon Smart World Cockpit, we want to offer German housing companies a complete solution with a compre-hensive, cross-application view of all relevant information, including a graphical depiction of the properties (showing, e.g., impending maintenance work and current occupancy rates) as well as a comprehensive overview of the tenant profi les. The solution can be adjusted according to user preferences. Adding further information and data is also easily done. Users can choose whether they want to access the application via their desktop computer or their mobile phone, and can also gather and edit data in real time.

Digital customer communication in B2B

After 2015 saw the implementation of all the necessary statutory regulations, Aareal Bank’s fi rst step towards complete digitalisation of client communication was the development of electronic bank statements. The advan-tages are not just a simplifi ed automated processing of account information and reduced effort for preserving and archiving bank statements; electronic bank statements as a medium also provide the opportunity of exchanging a large volume of information and data about the processes with the customer, thus allowing us to offer them tailor- made new products and solutions. Further means of elec-tronic communication will now be developed along the lines of the established structure.

Solution strategically pays into platform products, digital solutions, and the expansion of the Housing Industry eco system (BRM, CRM)

See graphic on page 17

Solution strategically pays into platform products, the development of the payment transaction service business and the expansion of the Housing Industry eco system (CRM)


19

BK 01 eConnect at a glance

SAP ERP using IS-UDocument management system

Direct transmission

E-mailWeb service

Indirect transmission

EDIsub-service

ZUGFeRD

XML

CSV

XLS

ARS

Invoices

Client

BK 01 eConnect

Data transmission

Flat and deep transmission format

Data capturing

Data capturingof invoice items and structure

Free decision on data Free decision regardingthe data format1. Free decision regarding

the communication path2. 3.

Expansion BK 01 eConnect

We pay particular attention to an effi cient cooperation between energy utilities and their partner industries. Thus, we are expanding BK 01 eConnect, our solution for auto-mated and customer-individual provision of invoice and other data, creating a multi-format application that allows companies to issue invoices in various fi le formats, e.g. ZUGFeRD, XML, Excel etc. Energy utilities can thus sub-stantially increase their service quality for bundle clients, chains, the property industry and other commercial clients.

Solution strategically pays into the expansionof further ecosystems (utilities)



BK 01 eConnect at a glance

SAP ERP using IS-UDocument management system

Direct transmission

E-mailWeb service

Indirect transmission

EDIsub-service

ZUGFeRD

XML

CSV

XLS

ARS

Invoices

Client

BK 01 eConnect

Data transmission

Flat and deep transmission format

Data capturing

Data capturingof invoice items and structure

Free decision on data Free decision regardingthe data format1. Free decision regarding

the communication path2. 3.

Expansion BK 01 eConnect

We pay particular attention to an effi cient cooperation between energy utilities and their partner industries. Thus, we are expanding BK 01 eConnect, our solution for auto-mated and customer-individual provision of invoice and other data, creating a multi-format application that allows companies to issue invoices in various fi le formats, e.g. ZUGFeRD, XML, Excel etc. Energy utilities can thus sub-stantially increase their service quality for bundle clients, chains, the property industry and other commercial clients.

Solution strategically pays into the expansionof further ecosystems (utilities)



Thomas Stoy

#All my accounts in one app. #Intuitive and #user-friendly. #I can now manage and release payments from anywhere and #at any time. #That’s what I call service.

* * Management Board member at the

housing corporation Duisburg-Hamborn eG

Aareal Sign

Aareal Sign is a multi-bank app which allows companies’ authorised signatories to check the balance of company accounts – at any time and from anywhere – and to release payments carried out by employees – in a secure and legally binding manner. Users can also incorporate accounts from other banks via the app, thus creating a transpa-rent overview of all their accounts with Aareal Sign. The application is based on the EBICS standard and uses the method of Distributed Electronic Signature (VEU).

Tenant app

A smartphone application designed as a daily companion for tenants is about to be launched in Germany. In France and the UK, tenant apps like this are already in use, ena-bling users to take care of rental and general living matters anytime, anywhere. This includes, for example, handing in notifications of claims, keeping track of the processing status of requests, downloading forms and certificates or reviewing contracts and master data. A calendar informs the users about important events, e.g. impending con-struction work, when an electricity meter reading has to be taken, or any other kind of upcoming event. Lastly, the app also offers a ’community function‘ with which neigh-bours can exchange information.

Trace & Treasury

Trace & Treasury is an integrated cloud computing solution for managing and appraising assets and liabilities. Used as part of a treasury management system, the software also supports your daily cash management. All data can be transferred into scenarios, in order to carry out a com-plete economic planning. The software has already been launched in the Netherlands and is currently being adapted to the requirements of other countries.

Solution strategically pays into platform products and the expansion of the Housing Industry ecosystem (CRM)


Solution strategically pays into the expansion of the Housing Industry ecosystem


Solution strategically pays into platform products and the development of the payment transaction service business


21

Aareal Bank Group’s Smart World

RentsAncillary costs

Wages

140 million postingsper year

Membership dues from cooperative members

Cash deposits

Rental deposits

Building management fees

Consultancy and systems house to the European property industry

Banking services for the German housing and property industries,

and for the energy utility and waste disposal industries

Aareal BankBank division Housing Industry

Aareon Group

Client

Employees Technical devices

Partner

Cloud computing

Real Estate Investment Consulting

Our solutions forprocess optimisation

and networking of industries

Social networks

Financings

Managementof deposits

Electronic Banking/payments

Digitalclientcommuni-cations

ERP

CRMMaintenance

Apartment handover

BIM

Strategic planning

Mobile solutions

Partnerintegration

Intelligent metering

Documentmanagement

Rental

(Residential) units managed by clients

10 million € 210.7 million sales revenues

€ 9.6 billion in deposits

(2016 avg.)

The number one ERP provider for the institutional housing industry in Europe,

for example in France and Germany

The number one provider for integrated payment transaction and booking systems for the institutional

housing industry in Germany


Interview with Prof. Dr Dr-Ing. Jivka Ovtcharova gb2016.aareal-bank.com/en/designlab

available in German only

Mapping of product examples shown: Processing chain Aareal Bank Group – market – clients

End clients

C/S Aareal/Aareon

Digital processes as a part of:

Business processes– Client – Bank

Payment transactions

Communications

Tena

nt a

pp

Aarea

l Porta

l

Aarea

l Sig

n App

Aareo

n Sm

art W

orld

Cock

pit

BK 01 e

Connec

t

Electro

nic a

ccoun

t

st

atem

ent

Trac

e & Tr

easu

ry

Eco- systems

Housing industry

Energy sectorand others

We develop these products and solutions with modern, agile working methods, such as the joint development of solutions with our clients in the

Aareon DesignLab

The key to finding new and innovative ideas is to seek unconventional ways. And using so-called ‘design thinking’ is one such way. This method is a structured process for the development of new digital – and, most importantly, user-oriented – solutions. However, an environment that really gets your creative juices flowing is indispensable if you want to use the entire potential of design thinking. Thus, in 2016, we created the DesignLab at Aareon. Since then, we have already hosted numerous innovation workshops using the principle of ’design first, develop later‘.

Rolf Hammesfahr, Head of IT at LEG Immobilien AG, says: ”While design thinking was not a completely new experience for us, actually developing a specific new digital solution with this agile method in Aareon’s DesignLab was a first. The workshop wasn’t just exciting, it was also productive, user- and target-oriented.”

23

Bank portal strategy”More quality, more efficiency, more flexibility, more functions” – When Lars Ernst, Group Managing Director, Group Business Consulting & Services, talks about the future platform strategy with his Housing Industry team at Aareal Bank, his excitement is palpable. “With our envisaged Portal 2.0, we are creating a comfortable and technologically leading infrastructure for our clients, an infrastructure with numerous advantages: it pro-vides them with a bank-independent overview of all balances and transactions, a simple payment release (adaptable accord-ing to individual authorisation concepts), and access from any device – wherever the users are, and whenever they wish. Our new portal doesn’t only grant our clients more flexibility, but also allows significantly less time-consuming trans-actions.”

Currently, a team of developers from different disciplines is working hard on finishing this project. ”It is our goal to create a base platform for every digital product, thus giving our clients an optimal overview and enabling a simplified admin-istration of their tasks. We intend it to not only incorporate multi-bank capabilities, but also a single sign-on (i.e. signing

on once, having access to all services), self-service functions for all basic banking processes, and the use of individually bookable, innovative add-on services – e.g. the Aareal Sign App – obviously with highest security standards and state- of-the-art signature media”, Ernst says. “Thus, the platform creates a considerably higher level of flexibility.”

Project manager Oliver Schimmel, Business Architect at Aareal First Financial Solutions AG, explains: ”We use the SCRUM procedure for the development of this portal solution. In other words, we proceed empirically, incrementally and iteratively, creating preliminary results and improving them as we go. This agile software development framework enables us to work much faster than with traditional methods. In addition, coordination is far easier because we discuss new project statuses and mock-ups on a near-daily basis. This approach also makes sense considering the functionality of the portal we are developing, as the preliminary results lead to its constant review and improvement.

from left: Christoph Hinsken, Business Unit Manager,

Development Java, Aareal First Financial Solutions AG;

Göran Gutberlet, Marketing & Communication Specialist,

Processes & Organisation, Aareal First Financial Solutions

AG; Simona Degreif, Business Consultant, Product

Management Banking, Aareal First Financial Solutions AG;

Christoph Hoffmann, Director Wohnungswirtschaft, Busi-

ness Development, Aareal Bank AG; Dagmar Lippert, Business Consultant, Product Management Banking,

Aareal First Financial Solutions AG; Lars Ernst, Group

Managing Director, Group Business Consulting & Services;

Oliver Schimmel, Business Architect, Development Cobol,

Aareal First Financial Solutions AG; Kai Riedl, Application

Architect, Product Management Banking, Aareal First Finan-

cial Solutions AG

24

’KIWI – The keyless access system‘gb2016.aareal-bank.com/

en/kiwi

”Cooperating with start-ups is of great strategic importance, as it allows us to offer clients optimal solutions”, says Lars Ernst, Group Managing Director Group Business Consulting & Services. ”That’s why we specifically look for collaborations with start-ups, working together closely throughout the Group. Start-ups often view things from a different perspective, have unconventional ideas, and their problem-solving strategies also differ from ours, making such a cooperation extremely rewarding.”

Naming an example is easy for Dr Manfred Alflen, Chairman of the Management Board at Aareon AG: ”The cooperation between Aareon and KIWI. KI is a perfect case. We entered into a sales cooperation agreement with this Berlin-based start- up in November 2016, and both parties are already benefiting strongly. KIWI. KI has developed an intelligent, keyless entry access system, which simplifies our customers’ property main-tenance, as the digital access system allows owners to pass on key privileges to – for example – tradesmen, without any-one having to be at home. Thus, we interconnect housing companies, tradesmen and tenants or owners in an even sim-pler and more efficient way than before.”

”As we want to establish further cooperations like this one in order to find forward-looking ideas for our clients, we monitor the start-up market closely and systematically”, Ernst remarks.

”Our start-up strategy doesn’t only include market monitoring

Start-up strategyand analysis, but also partnerships, participations, product integration, and taking part in start-up events. The newest pro-ject is our involvement in the first German PropTech accelerator, which we support alongside other established com panies from the property industry. This six-month accelerator pro-gramme promotes innovative digital business models within the property industry. We are already looking forward to the results, which will be presented this summer.”

”Aareal Bank Group sees itself as a kind of ’gravitational field‘ for start-ups. Our aim is an in-depth exchange with the start- up community, as this enables us to benefit from each other’s capabilities and experience, thus promoting the innovation power of our industry”, Holger Spielberg, Group Managing Director Group Technology, adds.

Dr Ing. Christian Bogatu, co-founder and Managing Director Business Development at KIWI. KI, comments: ”As a young and innovative company, we are delighted to have entered into a partnership with Aareon, the established, market-leading consultancy and systems provider. Aareon is a particularly interesting partner since our KIWI solution is an ideal fit for Aareon Smart World. This means that our partnership, which has been designed for the long term, offers additional poten-tial.”

from left: Holger Spielberg, Group Managing

Director Group Technology; Dr Manfred Alflen, Chairman of the Management Board of

Aareon AG; Lars Ernst, Group Managing

Director Group Business Consulting & Services

25Thinking ahead. Shaping the future. | Creating value – our segments

A framework for future success

With our Structured Property Financing and Consulting/Services business segments, we are one of the leading international property specialists, and recognised the opportunities

presented by digitalisation at an early stage. Our unique com-bination of financial institution and IT company has made us a pioneer of digital development in our industry, a role we want to further enhance. With our innovative and forward- looking solutions, we want to set market standards and be a forward-looking, competent partner for our customers in the digital age. Thus we strive to improve and strengthen those structures, processes and values within our Group which give us optimal support in our aim to identify and realise digital opportunities. IT architecture, transfer of knowledge and corporate culture are especially important pillars of this goal.

”Our corporate structure benefi ts cus-tomers in two ways: fi rstly, they know they can expect digital solutions which adhere to strict banking regulations as well as data protection and compliance requirements. Secondly, our customers can count on us offering them the necessary know-how, and complying with high demands regarding intelligent safety concepts.“

Christiane Kunisch-WolffMember of the Management Board of Aareal Bank

Digital enablers

26 Thinking ahead. Shaping the future. | Digital enablers

Digital enablers

A framework for future success

With our Structured Property Financing and Consulting/Services business segments, we are one of the leading international property specialists, and recognised the opportunities

presented by digitalisation at an early stage. Our unique com-bination of financial institution and IT company has made us a pioneer of digital development in our industry, a role we want to further enhance. With our innovative and forward- looking solutions, we want to set market standards and be a forward-looking, competent partner for our customers in the digital age. Thus we strive to improve and strengthen those structures, processes and values within our Group which give us optimal support in our aim to identify and realise digital opportunities. IT architecture, transfer of knowledge and corporate culture are especially important pillars of this goal.

”Our corporate structure benefi ts cus-tomers in two ways: fi rstly, they know they can expect digital solutions which adhere to strict banking regulations as well as data protection and compliance requirements. Secondly, our customers can count on us offering them the necessary know-how, and complying with high demands regarding intelligent safety concepts.“

Christiane Kunisch-WolffMember of the Management Board of Aareal Bank

Digital enablers


Central digital enablers

IT architectureProviding a powerful,

modular technicalinfrastructure tailored to

client needs

Knowledge transferAgile imparting and

provision of knowledge,for self-managed, fl exible learning

and cross-divisionalknowledge management

External factors

CompetitionIT securityStandards

Central digital enablers

of Aareal Bank Group

Corporateculture

Developing mindset and priorities further, with a

consistent focus on clients, a high level of agility, and above-average innovative

power

External factors

CompetitionIT securityStandards

27

above, from left: Holger Spielberg, Group Managing Director

Group Technology; Norbert Janzen, Director IT &

Organisation Services, Information Engineering;

Frank Höfl ing, Managing Director IT & Organisation

Services, Data Offi ce


above, from left: Holger Spielberg, Group Managing Director

Group Technology; Norbert Janzen, Director IT &

Organisation Services, Information Engineering;

Frank Höfl ing, Managing Director IT & Organisation

Services, Data Offi ce


Aareal Bank Group’s forward-looking IT

ITScalability of Aareal Bank Group’s strengths vis-à-vis clients and partners,and within the Group

Establishing an effi cient,streamlined and fl exible IT,

with shorter ’time-to-market‘

Achieve.

Adjust. Advance.Implementing

necessaryinvestments

IT architecture an interview with Holger Spielberg,

Group Managing Director Group Technology

Mr Spielberg, how important is a company’s IT infrastructure in today’s digital age?IT is definitely very important if a company not only wants to embrace the challenges presented by digitalisation, but also wishes to use them for establishing its own pioneer role. IT has to support agile work, and drive innovation processes, it has to be customer-focused and allow a high degree of variability in its interfaces, while, at the same time, being extremely flexible itself. Thus, a modern IT infrastructure is characterised by modules with low interdependence. It goes without saying that such an IT infrastructure also has to be developed according to the newest technical requirements.

How will Aareal Bank position its IT for the upcoming years?Our goal is to further increase the agility of Aareal Bank Group. Therefore, we continuously align our IT architecture with that objective. We establish new cross-divisional cooperation models, support autonomous results orientation, enable the anticipation of our clients’ needs and behaviour and, with the

help of our structures, encourage our employees to collaborate with each other. The IT structure design is developed to fit these strategic goals.

Where do you currently see room for improvement?A modern IT architecture is never complete, but rather in a state of constant change. Within the scope of Aareal 2020, we thus decided on a strategic realignment and further development of our IT. Three dimensions are especially important. Firstly, we want to dissolve existing technical complexities, e.g. the depen-dency of system components. Secondly, we want the IT archi-tecture to support our Group’s business strategy even better, e.g. with higher data quality, improved data exchange, and higher modularity. And thirdly, we want to increase the speed of adjust-ment in IT itself – in order to be able to respond even faster to any changes.

29Thinking ahead. Shaping the future. | Digital enablers

Agility at its best: the Bankathon

Pizza cartons, energy drinks and lots of bankers in hoodies: 85 participants in 24 teams competed in the Bankathon programming contest (9-11 October 2016), including three teams from Aareal Bank Group.

”I never would have thought that so many innovative ideas and prototypes can be developed in only 30 hours”, Daniel Höfelmann, team Innovation Management, says. ”That was agility at its best: no extensive planning, just doing. The ideas just came gushing out, non-stop.”

This year’s Bankathon topic was Payment Services Directive 2. In groups of four, the participants’ goal was to develop proto-types of a digital product within 30 hours of continuous work and then to present their product in a live demo. Aareal Bank Group’s employees developed three prototypes: an integrated administration, control and projection solution for rental con-tracts and cash flows of commercial properties with numerous rental units (”Block Mall”, based on blockchain technology and ”Mall 4.0”) as well as an application for the cash man-agement optimisation of different accounts (“OneTouchCash-Management”).

”What fascinated me most about the Bankathon – in addition to the actual ‘speed prototyping’ – was trying out new appli-cation programming interfaces (API) and technologies as well as discussing them with other coders”, Höfelmann adds.

”A programming contest like this makes people bond; we have already discussed continuing our collaboration with other participating teams from fintechs and start-up companies. But the best thing is that these prototypes we developed have potential. They can be refined, and can generate additional value for Aareal Bank Group. That motivates us to come back next year.”

Daniel Höfelmann, Director Group

Technology, Innovation

Management

The Aareal Bank Group team

30

Interview with Katja Hennig and Sven Robingb2016.aareal-bank.com/en/knowledge- transfer

available in German only

Ms Henning, which specific challenges do you see for the knowledge transfer within your area of responsibility in the digital world?In the case of Aareal Bank’s Housing Industry division, the speed with which change occurs nowadays has made the transfer and provi-sion of knowledge clearly more challenging than in the past . The time span we have for providing new contents and updating already existing information is getting more limited each day. From a technical perspective, it isn’t really a problem, it’s more of a complexity issue, as the actual provision of knowledge is less of a challenge than finding the correct information.

How do you deal with these challenges in your division?In 2016, we developed a digital knowledge pool for the Housing Industry division and published it on our intranet. In 2017, we will systematically expand knowledge manage-ment and establish a platform for a Group-wide exchange. In addition, Aareon also offers its clients numerous webinars, which enable the digital knowledge transfer for the use of its products.

Mr Robin, from the perspective of Human Resources, what are the most important elements of modern knowledge transfer?First of all, it is essential that employees and executives understand the rapidly growing importance of knowledge management and act accordingly. Those who don’t use knowl-edge management systems on a regular basis, who don’t constantly educate themselves fur-ther, and who don’t provide their own knowl-edge to the benefit of others, will quickly be left by the wayside. Search and structuring features, links and shortcuts are of utmost importance. Modern knowledge management systems have to be very agile and should

evolve constantly. Above all, however, they have to be intuitive and strictly user-focused in their structure and functionality.

What will Aareal Bank Group’s knowledge management look like in future?We want our knowledge management to be structured in form of a knowledge dialogue and less in form of pure knowledge retrieval. Our knowledge management is to act as a basis for autonomous and flexible learning, thus serving the purpose of an improved client focus, agility, and innovative capacity within Aareal Bank Group.

Knowledge transfer An interview with Katja Hennig, Senior Manager

Housing Industry, Sales and Sven Robin, Senior Manager Human Resources, Consulting/Development

31Thinking ahead. Shaping the future. | Digital enablers

from left: Jens Huchting, Group Managing Director Group Human

Resources, Brigitte Butz, Managing Director Human Resources,

Claudia Schmidt, Human Resources Service Center

Agile working methods

In order to develop client-focused digital solutions with a high degree of fl exibility and speed, Aareal Bank Group deploys new, ’agile‘ working methods, including the ones shown on the right:


from left: Jens Huchting, Group Managing Director Group Human

Resources, Brigitte Butz, Managing Director Human Resources,

Claudia Schmidt, Human Resources Service Center

Agile working methods

In order to develop client-focused digital solutions with a high degree of fl exibility and speed, Aareal Bank Group deploys new, ’agile‘ working methods, including the ones shown on the right:


Mr Huchting, why is everyone talking about the development of corporate culture?In this digital age, certain behavioural stand-ards are crucial and imperative for success if a company wants to gain a competitive edge. For us at Aareal Bank Group, a consistent focus on our clients, a high level of agility and an above-average innovative capability are central factors which support us in strength-ening our market position and enhancing our role as a digital pioneer. Such behavioural standards and priorities cannot simply be mandated, and they don’t just change over-night either. They have to be incorporated into the corporate culture – and from there, impact on the actual behaviour of all employ-ees and executives.

So, when talking about client focus, agility and innovative capabilities, what exactly does that mean?Focusing on our clients means making them the centre of our attention, it means knowing and understanding our clients and establish-ing trusting partnerships with them. Being able to react swiftly and implement changes in a dynamic environment with complex require-ments – that is our understanding of agility. It is reflected, for example, in the way we pro-ceed: we think and act with an entrepreneurial spirit, we engage in cross-divisional and cross- company collaboration, and work fast and efficiently. And, last but not least, being inno-vative means continuously searching for new impulses to enhance our work and our clients’ success, having the courage to question the status quo, and giving each and every one of our employees the flexibility and personal freedom they need to learn and develop new ideas.

How do you implement these goals in Aareal Bank Group’s corporate culture?First of all, we check to see in which areas we ourselves don’t comply with these behav-ioural standards yet, and what is keeping us from doing so. At the same time, we provide impulses for a cultural change – with flagship projects and the creation of an appropriate framework, e.g. with Creative Boxes, new workflows and working methods and with the help of Agile Coach Pools (short explanation of terms via drop down text boxes and mouse hovers). Within this context, the executives play an important role, as they have to live up to the expectations of their role model function. In order to be able to measure our progress, we have launched a change moni-toring process, which surveys the general mood at regular intervals.

Corporate culture An interview with Jens Huchting, Group Managing Director, Group Human Resources

SCRUMProject management method characterised by a high degree of fl exibility and only a few simple rules: the cross- functional project team organises itself, working using empirical evidence, incremental results and iterative approaches.

Design ThinkingApproach to develop new solutions in a creative environment. A cross-functional team views client needs from different perspectives, employgin various methods akin to those used by designers.

Lean StartupMethod to develop products and business models: prototypes are used within the scope of empirical studies to evaluate the success of innovations. In this context, prototypes are being gradually developed into a fi nal product that is market-ready.

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Essay ”A culture for the digital age“

”A culture for the digital age“

Please excuse us, we would like to ask you a brief question: what is the status quo of the digital transformation? Let us per-form a simple test: let us close our eyes for ten seconds and let our imagination go wild. Most people will probably see robots, computers, user interfaces, tablets, smart-phones, antennae, and cable clutter. You know, all that stuff to do with technology.

You might even have enough time for a little future scare: will artificial intelligence come to replace us, we humans being the naturally intelligent? These and other images wouldn’t be surprising. They have always been a part of change.

A person, however, who thinks about everything that is about to come and how it will fit together with the current state of affairs in a rational and calm manner, will probably pull the plug on such fears pretty quickly. Pessimism gives bad advice. And, in fact, we aren’t really talking about ”stuff to do with technology and the internet”. We are talking about us, about human beings and our relationships, about what we can do for each other. In other words, we are talking about our culture.

Of course digital transformation is a part of technical evolution. It is, however, not a revolution – it doesn’t break with the entire status quo. The history of civilisation has always been about automation, about the simplification of routine processes. Imagine the first tools and methods: their obvious objective was to improve things in life. Often that also means making life easier. Improvement serves the purpose of disburdening humans from monotonous, hard, annoying, repetitive work – or even liberating them from it .

34 Thinking ahead. Shaping the future. | Essay ”A culture for the digital age“

”A culture for the digital age“

Please excuse us, we would like to ask you a brief question: what is the status quo of the digital transformation? Let us per-form a simple test: let us close our eyes for ten seconds and let our imagination go wild. Most people will probably see robots, computers, user interfaces, tablets, smart-phones, antennae, and cable clutter. You know, all that stuff to do with technology.

You might even have enough time for a little future scare: will artificial intelligence come to replace us, we humans being the naturally intelligent? These and other images wouldn’t be surprising. They have always been a part of change.

A person, however, who thinks about everything that is about to come and how it will fit together with the current state of affairs in a rational and calm manner, will probably pull the plug on such fears pretty quickly. Pessimism gives bad advice. And, in fact, we aren’t really talking about ”stuff to do with technology and the internet”. We are talking about us, about human beings and our relationships, about what we can do for each other. In other words, we are talking about our culture.

Of course digital transformation is a part of technical evolution. It is, however, not a revolution – it doesn’t break with the entire status quo. The history of civilisation has always been about automation, about the simplification of routine processes. Imagine the first tools and methods: their obvious objective was to improve things in life. Often that also means making life easier. Improvement serves the purpose of disburdening humans from monotonous, hard, annoying, repetitive work – or even liberating them from it .

34 Thinking ahead. Shaping the future. | Essay ”A culture for the digital age“

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250 years ago, with the dawn of industrialisation came machines which were used in factories and on farms, leading to plenty of prosperity and free time, releasing energy and potential for the creation of even better, more precise and more indi-vidual solutions. In today’s digital transformation, it is exactly the same.

People who don’t understand it think automation only serves automation, mean-ing that robots take over the work humans have been doing. This, however, would make no sense, as it would only lead to the automation of processes that already exist . But that is not what it is about. No, it is about progress, about improvement.

Hard work and discipline were an important part of the early industrial society. Competence, punctuality and accuracy were necessary character traits. In today’s knowledge society, created by digital transformation, creativity and empathy are sought after. Businesses need to know what the customer wants. Thus, individu-ality and empathy are not only the foundation of today’s digitally-driven ”industry 4.0”, but of every service and all knowledge-based work. But does that mean that all former virtues are redundant, that a new culture just wipes out the old one?

No, it doesn’t . To use the words of German philosopher Odo von Marquard: ”The future needs a heritage." Transferring this to the concept of digital transfor-mation means that one should not think in an either-or way – either as a start-up, or as an efficient organisation with harmonised processes – but synthetically combine both aspects. We need to simultaneously get a grip on the spirit of a new beginning and individuality, and on the spirit of manageable routine.

Until now, the concept of culture has always referred to something uniform and explicit . With the arrival of this new culture, that is no longer valid. In fact, it doesn’t ask us for an "either-or", it requires an "as-well-as". Transformation means open innovation. The success of a business is based on diversity and dis-tinction, or, in other words: successful digital transformation opens up the doors and floors of a company. Digital transformation wants to know the client, the human being, and their needs. Diversity as such does not, however, mean ”any-thing is possible”. Not at all. Openness to a large number of issues also requires contours and clear boundaries. In this new digital world, reliability and recognition will become even more valuable than in the old culture.

Therefore, all the knowledge that has accumulated in the past decades isn’t a burden – certainly not. In fact, it acts as the foundation for this new era. A culture of diversity for this digital age is a culture which encourages the seeking out of new opportunities. This virtue is the basis of all entrepreneurship: wanting to know what is possible, and wanting to know how to solve problems. Thus, the core of the culture of digital transformation is identical to that of former entrepreneurship, of the ”analogue world”: being curious about and interested in people. It is about transparency and contours, carrying us through whatever change may bring.

Wolf Lotter, Business journalist and

book author

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